Wall Street retreats from record high as energy shares fall with oil

Aug 1

The S&P 500 and the Dow dipped in afternoon trading on Monday, as a drop in oil prices dragged down energy stocks, while tech names Apple and Alphabet helped drive the Nasdaq higher.

The S&P had hit a record high earlier in the session, but was unable to hold gains as US crude fell below $40 a barrel to its lowest level since April.

The correlation between oil prices and equities, which had been very strong until oil rose above $40, is resurfacing now, said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas.

“If oil falls back below $40, which it appears it is going to, it is likely that correlation will come back and that is what we are seeing now.”

The S&P gained 3.6 per cent in July - its best month since March - touching intraday highs seven times, on improving economic data and as corporate earnings were not as bad as had been initially feared.

Earnings are now expected to decline 3 per cent for the second quarter, according to Thomson Reuters data, an improvement from the 4.5 per cent decline expected on July 1.

Exxon and Chevron were down 2.9 per cent and 3.3 per cent, respectively, and were the biggest drags on both the Dow and the S&P 500. The S&P energy sector lost 3.3 per cent.

The Dow Jones industrial average fell 41.46 points, or 0.22 per cent, to 18,390.78, the S&P 500 lost 3.73 points, or 0.17 per cent, to 2,169.87, and the Nasdaq Composite added 21.24 points, or 0.41 per cent, to 5,183.37.

Apple Inc rose 1.3 per cent, providing the biggest boost to the three main indexes. Apple has gained more than 9 per cent since reporting results last week. Google parent Alphabet Inc was up 1.5 per cent at $803.04.

After tepid US second-quarter gross domestic product data on Friday dimmed some of the optimism over the state of the economy, data on Monday showed US manufacturing activity slowed in July as orders fell broadly and construction spending dropped in June.

Traders saw the chance of a Federal Reserve interest rate hike by year-end at about 35 per cent, according to CME Group's Fedwatch, down from more than 50 percent last week.

SolarCity Corp fell 7.8 per cent, to $24.62, and Tesla Motors declined 1.6 per cent, to $230.99, after Tesla said the two companies had agreed to merge.

Declining issues outnumbered advancing ones on the NYSE by a 1.44-to-1 ratio. On Nasdaq, a 1.05-to-1 ratio favoured advancers.

The S&P 500 posted 36 new 52-week highs and no new lows; the Nasdaq Composite recorded 96 new highs and 18 new lows.